MGT 212: Organizational

Management 

Chapter 6- Decision Making

MD Asif Hossain 
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Today’s Topic

 Decision Making
 Decision Making Process
 How managers takes decisions
 Types of problems and decision
 Decision making condition
 Design Thinking & Big Data 
 Guideline for effective decision making

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Problem Solving

 Define a problem
 Look at the problem from different perspectives and
generate multiple solutions
 Evaluate the ideas or possible solutions
 Implement your solution
 Re-examine your solution

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Decisions Managers May Make

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Decision Making Process
 Decision- A choice among two or more
alternatives
 Step 1: Identify a Problem
 Step 2: Identify Decision Criteria
 Step 3: Allocate Weights to the Criteria
 Step 4: Develop Alternatives
 Step 5: Analyse Alternatives
 Step 6: Select an Alternative
 Step 7: Implement the Alternative
 Step 8: Evaluate Decision Effectiveness
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Decision Making Process (Cont.)

 Step 1: Identification of a Problem

 Problem
 A discrepancy between an existing and desired condition
 Characteristics of Problems
 A problem becomes a problem when a manager becomes aware of it
 There is pressure to solve the problem
 The manager must have the authority, information, or
resources needed to solve the problem

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Decision Making Process (Cont.)
 Step 2: Identification of Decision Criteria For buying a new Laptop
 Decision criteria are factors that are important
(relevant) to resolving the problem:
 Costs that will be incurred (investments required)
 Riskslikely to be encountered (chance of failure)
 Outcomes that are desired (growth of the firm)

 Step 3: Allocate Weights to the Criteria

 Decision criteria are not of equal importance:
 Assigning a weight to each item places the items in the
correct priority order of their importance in the decision-
making process
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Decision Making Process (Cont.)
 Step 4: Development Alternatives
 Identifying viable alternatives
 Alternatives are listed (without evaluation) that can
resolve the problem

 Step 5: Analyze Alternatives

 Appraising
each alternative’s strengths and
weaknesses
An alternative’s appraisal is based on its ability to
resolve the issues identified in steps 2 and 3.
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Decision Making Process (Cont.)

 Step 6: Selection of an Alternative

 Choosing the best alternative
The alternative with the highest total weight is
chosen
 Step 7: Implementation of the Alternative
 Putting the chosen alternative into action
Conveying the decision to and gaining commitment
from those who will carry out the decision

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Decision Making Process (Cont.)
 Step 8: Evaluation of Decision Effectiveness
 Thesoundness of the decision is judged by its
outcomes:
How effectively was the problem resolved by
outcomes resulting from the chosen
alternatives?
Ifthe problem was not resolved, what went
wrong?
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Decision-Making Process (Cont.)

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Perspectives on How managers make
decisions

 Rationality
 Bounded Rationality
 Intuition
 Evidence-Based Management

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Perspectives on How managers make
decisions (Cont.)

 Rationality- Describes choices that are logical and

consistent and maximize value
 Assumptions of Rationality, decision makers are:
 Fully objective and logical
 Have a clear and specific goal
 Selects alternatives that maximizes the likelihood of
achieving goal.
 Decision made in the best interest of the organization
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Perspectives on How managers make
decisions.
 Bounded Rationality-
 Decision making that’s rational, but limited/bounded by
an individual’s ability to process information (More
Realistic)
 Assumptions of Bounded Rationality :
 Will not look at all alternatives
 Will Satisfice (Take decisions that are just good enough)
 Can be influenced by escalation of commitment (Sticking to
previous decisions, even if it was a wrong one) 14
Perspectives on How managers make
decisions (Cont.)
What is Intuition?

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Perspectives on How managers make
decisions (Cont.)
 Role of Intuition-
 IntuitiveDecision Making: Making decisions on the basis of
experience, feelings, and accumulated judgment
 Using Intuitions managers are able to make quick and
effective decisions (Based on past experience) One-third of
managers and other employees said they emphasized “gut
feeling” over cognitive problem solving
 The old belief that managers should ignore emotions when
making decisions may not be the best advice.
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Perspectives on How managers
make decisions (Cont.)
 evidence-based management- (EBMgt) 
The systematic use of the best available evidence to improve
management practice. This includes using data/ statistics to
make decisions.

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Types of Problems and Decisions
 Structured Problem
 Unstructured Problems

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Types of Problems and Decisions
 Structured Problems
 Straight forward problems
 Have clear goals
 Are easily and completely defined
 Example: Customer returning a product to your store

Solutions
 Programmed Decision 
 A repetitive decision that can be handled by a routine approach
 For example: Customer wants to return purchased clothes. Managers takes the
product and return according to company policy.
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Un- Structured Problems
 Unstructured Problems
 Problems are new or unusual;
 information is ambiguous or incomplete

Solutions
 Non-programmed Decisions
 Decisions
are unique and nonrecurring; they require
custom-made solutions
 Thus, few managerial decisions in the real world are
either fully programmed or non-programmed. Most fall
somewhere in between.
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Programmed Vs Non-programmed
Decisions

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Decision-Making Conditions
 When making decisions, managers may face three
different conditions: certainty, risk, and uncertainty

 Certainty-A situation in which a manager can make

accurate decisions because all outcomes are known
 Risk-
A situation in which the decision maker is able to
estimate the likelihood of certain outcomes

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Decision-Making Conditions (Cont.)
 Uncertainty- A situation in which a decision maker has
neither certainty nor reasonable probability estimates
available
 Limited information prevents estimation of outcome probabilities;
may force managers to rely on intuition, hunches, and “gut
feelings”

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 Design Thinking and Decision Making
 Approachingmanagement
problems as designers
approach design problems
 Encourages management to
explore alternatives, find new
option.
 Focuses on the need of the
users.

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Big Data and Decision Making

 Thevast amount of quantifiable information

that can be analyzed by highly sophisticated
data processing

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Decision-Making Biases and Errors Example
s
 Heuristics
 Using “rules of thumb” to simplify decision making
 Overconfidence Bias
 Holding unrealistically positive views of one’s self and one’s performance
 Immediate Gratification Bias
 Choosing alternatives that offer immediate rewards and avoid immediate
costs
 Anchoring Effect
 Fixating on initial information and ignoring later information
 Selective Perception
 Selecting, organizing, and interpreting events based on the decision maker’s
biased perceptions 26
Decision-Making Biases and Errors (cont’d)
 Confirmation Bias
 Seeking out information that reaffirms past choices and discounting
contradictory information
 Framing Bias
 Selecting and highlighting certain aspects of a situation while ignoring
other aspects
 Availability Bias
 Losing decision-making objectivity by focusing on the most recent
events
 Representation Bias
 Drawing analogies and seeing identical situations when none exist
 Randomness Bias
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 Creating unfounded meaning out of random events
Guidelines for Effective Decision Making
 Understand cultural differences
 Create standards for good decision making
 Good decisions are forward-looking, use available information, consider all
available and viable options, and do not create conflicts of interest
 Know when it’s time to call it quits
 Use an effective decision-making process
 it focuses on what’s important; (2) it’s logical and consistent; (3) it acknowledges
both subjective and objective thinking and blends analytical with intuitive
thinking; (4) it requires only as much information and analysis as is necessary to
resolve a particular dilemma; (5) it encourages and guides the gathering of
relevant information and informed opinion; and (6) it’s straightforward, reliable,
easy to use, and flexible.
 Develop your ability to think clearly
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Decision Making Styles

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Summary
 Decision making is a choice among two or more alternatives
 Decision Making Process includes Identifying a Problem, Identifying
decision criteria, allocating weights to the criteria, developing
alternatives, analysing alternatives, selecting an alternative, implementing
the alternative, evaluating Decision effectiveness
 Managers focus on rationale and intuition while
taking decisions
 There are structured problems and unstructured problems
and programmed decisions and non-programmed decisions 
 Decision making condition are Certainty, Risk, Uncertainty

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ANY QUESTIONS ?
Further Reading

 Chapter 2- Management 14th Edition- Stephen P.

Robbins, Mary Coulter
 https://blog.udemy.com/decision-making-styles-2
/

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